Apple's New IPhones Poised for Record as China Joins Debut

By Adam Satariano -
Sep 20, 2013

Apple Inc. (AAPL) attracted long lines of shoppers today for the global debut of its latest iPhones, the company’s biggest product introduction this year.

In New York, customers lined up around the block to get into Apple’s flagship Fifth Avenue store, while in Munich about 2,000 gathered to buy the new iPhone 5s and 5c, and in London the waiting crowd stretched about a mile. Apple Chief Executive Officer Tim Cook and other executives visited customers at stores in Palo Alto, California, near the company’s campus.

“I started lining up five days ago,” said Sachihisa Saishiki, a 45-year-old who has camped outside the Tokyo store at least six times previously. “I was with a group of 10, and we took turns going out for food, going back home to take showers. I spent time sleeping out here, too, lying down on a cardboard box,” he said after buying a gold iPhone 5s.

The iPhone 5s and 5c went on sale today in U.S., Australia, Canada, China, France, Germany, Hong Kong, Japan, Puerto Rico, Singapore and the U.K. It’s the first time Apple rolled out its flagship product for sale in China on the same day as elsewhere, abandoning the usual three-month delay, as the company seeks to lure new customers in the world’s largest mobile-phone market.

“Last year, if you wanted an iPhone 5 right after the launch, it was very expensive because you had to buy one that had been brought in from Hong Kong or the U.S.,” said Max Zhang, a 20-year-old student, among the roughly 50 people waiting at the Wangfujing store in Beijing for an iPhone 5s. “Now that I can buy it directly in the Apple Store, it’s cheaper.”

“It’s the one distinct model where you can tell it’s the new one,” said Vincent Villalba, 25, of New York, who began waiting in line at the Fifth Avenue store at 3 a.m. to get a gold version. “If any store is going to get a large shipment, it’s this one.”

Opening-weekend sales are crucial to boosting Apple after almost a year without releasing a new device and ceding market share to rivals including Samsung Electronics Co. (005930) in the $280 billion smartphone market. Whether the Cupertino, California-based company can surpass the record 5 million smartphones sold during last year’s iPhone debut depends on whether there is enough supply of the feature-rich iPhone 5s.

Enough Inventory?

“It really depends entirely on how good or bad the yields on the 5s are,” said Carl Howe, an analyst at Yankee Group, who correctly predicted opening weekend sales last year. Apple could top 7 million in sales if it has enough handsets, though “Apple may not even hit the 5 million I predicted last year if the 5s is in really short supply,” he said.

Apple typically puts out a press release with opening-weekend sales figures on the Monday after a debut.

“Visited Retail Stores in Palo Alto today,” Cook said in his first post on Twitter today. “Seeing so many happy customers reminds us of why we do what we do.”

Natalie Kerris, a spokeswoman for Apple, said demand for the new iPhones was “incredible” and that they were sold out or in limited supply at some stores.

The iPhone 5s features a new camera and faster processor. It costs $199 to $399 depending on the amount of memory and with a two-year wireless contract. Without a contract, the smartphone costs at least $649.

For the less-expensive iPhone 5c, Apple took last year’s iPhone 5 and mostly repackaged it in a new plastic casing that’s offered in five different colors. It costs $99 to $199 with a two-year contract, or $549 without one.

Software Flaws

This week, Apple also released the new iOS 7 mobile operating system for iPhone and iPad. Some customers experienced long delays trying to download the software, which includes sweeping graphical changes such as a new look for e-mail, camera, text messaging and other applications. Apple also is fixing a security flaw regarding the passcode lock screen in iOS 7, said Trudy Muller, a spokeswoman for Apple.

With the iPhone debut, how Apple performs in China is particularly important given the scale of the market there. Analysts have questioned whether the price of the iPhone 5c -- more than the equivalent of $700 because of tariffs -- will be too expensive for customers in China. Partly because of that, Apple shares have fallen 6 percent since the company announced the iPhone pricing last week.

Worth It

A survey of 25 of the earliest customers at the Beijing store found 22 customers were there for the more expensive 5s model, compared with three for the 5c.

“Tim Cook is now finally treating China as important as the U.S.,” said Tony Yu, 28. The local government bureaucrat woke up at 2 a.m. and drove more than 300 kilometers (186 miles) from Qinhuangdao to be at the Beijing store by 6 a.m. “It costs me about one month’s pay, but it’s worth it.”

Apple will sell as many as 6 million units even though it won’t have enough iPhone 5s handsets available, according to Gene Munster, an analyst at Piper Jaffray Cos. (PJC) New fingerprint-reading technology makes the gadget harder to manufacture, he said. Ben Reitzes, an analyst at Barclays Plc, said demand seemed better than projected and sales could top 7 million if Apple has enough supply.

Apple fell 1 percent to $467.41 in New York. The shares have slid 12 percent this year, compared with a 20 percent gain for the Standard & Poor’s 500 Index.

Camping Out

In some places, people started camping out in front of Apple stores days ago to get the new iPhones, evoking scenes from earlier product introductions -- even though the gadget is now six years old.

At Tokyo’s Ginza area store there were about 800 people, including some dressed as Batman and Apple co-founder Steve Jobs in a face mask, jeans and black turtleneck.

At the Paris Opera store, dozens of people had gathered by 7:30 p.m., prepared to stay overnight with a weather forecast for rain. Some had blankets and campers’ chairs. At the Louvre, a group of 20 Italians had waited since yesterday morning.

“We all met through Facebook, got on a bus and came to Paris to get the new iPhone because it’s not available in Italy,” said Jacopo Famularo, a 23-year-old blogger from Verona.

Outside Apple’s Regent Street store in London, the line was about 1 mile (1.6 kilometers) this morning. Said Alkadi, a 52-year-old dentist, had flown from Jordan to buy new iPhones for his kids because they will only go on sale in the country later.

“They can’t wait that long,” he said. “When I get home I will be dancing in the street because I completed the mission!”

Samsung Rivalry

Every iPhone release is critical for Apple because the product accounts for about half its revenue. Since the iPhone 5 started selling last year, the company has faced increased competition from rivals including Samsung, which has become the world’s largest maker of smartphones by offering customers a wider variety of designs and prices.

Samsung uses Google Inc.’s Android operating software, which accounted for 79 percent of worldwide smartphone shipments last quarter, compared with 13 percent for Apple’s iOS, according to research firm IDC. While reviewers such as the Wall Street Journal’s Walt Mossberg and Bloomberg’s Rich Jaroslovsky praised the iPhone 5s, they wrote that Samsung’s devices offer close competition.

Apple fans in New York got similar advice. “Buy an Android!” a passing motorist yelled at the shoppers lined up at the Fifth Avenue store.

Slowing Down?

In San Francisco, Irene Schilter, a tourist from Switzerland, watched customers line up outside a Verizon Wireless store to get the new iPhones. “I can’t believe they are waiting for a mobile phone,” she said.

While reviewers described the iPhone 5s as better than previous versions, they said it’s not an industry-changing upgrade as some earlier models have been.

“Apple excitement might be slowing down a bit,” said Eric Guadalupe, 31, a New Yorker in line at the Fifth Avenue store for a gold 5s. “But my 10-year-old daughter is already sucked into it. And if they have the kids, they have us.”

Brand loyalty remains important for many Apple enthusiasts, who cited the company’s attention to detail in its products.

“I’m a huge Apple fanboy, there’s no other way to put it,” said Joe Engo, who added that he has used the same American-flag folding chair to wait in line to buy every iPhone on the first day since 2007.